In the median U.S. skilled nursing facility, fee-for-service Medicare paid for just 8 percent of resident days in 2024, while Medicaid paid for 64 percent, according to (MedPAC’s March 2026 report). The same report puts the all-payer total margin for freestanding SNFs at 2.1 percent. Meanwhile, (55 percent of eligible Medicare beneficiaries) were in Medicare Advantage in 2026. The figures cover different populations, but the conclusion is the same: your billing agreement can’t treat traditional Medicare claims as the whole job.
That’s the lens for reading a medical billing service agreement for a nursing home. A proposal can promise your full revenue cycle while the contract excludes Medicaid pending follow-up, puts old AR in the fee base, or charges for the data you need when you leave. You still own those balances, and the (CMS-855A enrollment application) is clear that using a billing agency doesn’t relieve an institutional provider of responsibility for claims submitted on its behalf.
This guide from LTCPro’s long-term care billing team follows the order risk shows up: who owns each task, which deadlines the SLA must respect, how fees and performance are measured, and what you get back at the end.
The Short Answer: What a U.S. Nursing Home Billing Service Agreement Must Do
A U.S. nursing home billing service agreement should define work by payer, set vendor service levels that allow time to meet federal deadlines, fix KPI formulas, specify the fee base, assign compliance and data-access duties, and provide for termination, old-AR runout and return of usable data. It’s your contract with the billing company, not a reimbursement contract with a payer.
Behind every clause sits one question: who carries the risk when work stalls? A vendor can’t answer for a state’s eligibility decision or records your staff hasn’t supplied, but no claim should sit unbilled because each side thinks the other owns the next step.
Why Standard Billing Contracts Underprice SNF Risk
Medicaid work starts before a claim exists
An application may be pending, eligibility may be approved retroactively, or patient liability may need to be reconciled. A vendor can meet every submission promise while those balances age. If pending work is in scope, require a resident-level log, a named owner and a handoff to billing once eligibility resolves. If it’s out, say so.
Medicare Advantage needs authorization visibility
Under (CMS-0057-F), impacted payers generally must decide non-drug prior authorization requests within 72 hours for expedited requests and seven calendar days for standard ones, starting in 2026. Those are payer obligations, not vendor deadlines. If you buy authorization support, require tracking of requests, responses, denial reasons and review dates.
Thin margins hide backlogs
MedPAC also reports a negative 2.3 percent margin on non-FFS Medicare business, a category covering every payer and line of business except fee-for-service Medicare SNF care. It isn’t a Medicare Advantage margin, but it’s a strong reason to require payer-level reporting rather than judging a vendor on total cash.
Scope of Services: Write the Schedule by Payer
Attach a signed scope schedule naming each facility, payer, task, deliverable, start date and the party who supplies the information. A promise of full-service billing is no substitute.
| Payer or workstream | What the schedule should settle |
|---|---|
| Medicare Part A and Part B | Claim preparation, billing-input checks, returned claims, posting, consolidated billing questions, coinsurance and crossovers |
| Medicare Advantage | Claims only, or also authorizations, concurrent reviews, records requests, denials and appeals |
| Medicaid and managed care | Each state program, pending eligibility, patient liability, claims and retroactive payments |
| Private pay | Statements, posting, follow-up, and who speaks with families |
| Resident trust funds | Included, contracted separately, or excluded |
| Across payers | Credit balances, rebills, audit requests, appeals and pre-contract balances |
For Part A, mark the line between clinical and billing work: the vendor flags gaps, while your clinical team owns assessments under the (Patient Driven Payment Model) and the documentation behind the (SNF’s consolidated billing responsibility). Define handoffs too: when a Medicare Advantage plan requests records, who receives, gathers and sends them? (Read the OIG’s guidance for third-party billing companies) which recommends putting sole and shared compliance duties in the written contract.
Multi-state operators should name each Medicaid program and plan and provide assisted living communities with a separate schedule.
Regulatory Clocks Your Billing Company SLA Must Beat
A good billing company SLA leaves time to act before a federal deadline expires. It doesn’t transfer your obligations; it requires the vendor to spot risk, alert the right person and record the handoff.
| Federal clock | Source | Internal commitment to negotiate |
|---|---|---|
| Medicare claims filed within one calendar year | 42 CFR 424.44 | A much shorter submission schedule, with held claims escalated as they near the limit |
| Identified overpayments reported and returned within 60 days, with a limited suspension for good-faith investigation | 42 CFR 401.305 | Prompt notice of suspected overpayments, with supporting records |
| Business associate breach notice within 60 days of discovery | 45 CFR 164.410 | A much shorter incident escalation period |
| Documentation requests answered in 45 days, or 30 for a UPIC | CMS ADR guidance | Immediate routing, named record owners and an earlier internal deadline |
| Most enrollment changes reported within 90 days | 42 CFR 424.516 | Billing agency details for your CMS-855A update at signing and exit |
| Payer authorization decisions in 72 hours or seven days | CMS-0057-F | If in scope, submissions, responses and review dates logged |
Denial turnaround and posting lag have no federal number but drive cash, so define both in business days with a precise start event. And require every held claim to stay visible with amount, reason, owner and next follow-up. Without that exception log, a vendor can report excellent submission times while excluding the claims most likely to miss a deadline.
Take This Checklist Into Your Contract Review
The Billing Contract Checklist follows this article section by section, from scope and regulatory clocks to fees, KPIs, compliance and exit, with space to note what your draft says and what to negotiate.
The Billing Contract Checklist follows this article section by section, from scope and regulatory clocks to fees, KPIs, compliance, and exit.
Fee Structure and Incentive Design in Outsourced Billing Contracts
Fees decide which work gets rewarded. (Read the OIG’s third-party billing guidance) which notes a longstanding concern that percentage arrangements may increase the risk of upcoding. There’s a practical question too: will a fee tied only to cash give slow Medicaid pending and small-balance work enough attention?
Make four decisions in the pricing exhibit:
- Define collections. Cover patient liability your staff collects, pre-contract claims, retroactive Medicaid payments, unworked receipts, refunds and recoupments.
- Price legacy AR. Decide whether pre-contract accounts fall under the base fee, a runout rate or a separate cleanup project.
- Match the model to the work. A hybrid can suit heavy eligibility work, but it isn’t automatically best.
- List every other charge, from implementation and data exports to termination.
Read one rule narrowly. Under (42 CFR 424.73), when Medicare pays a billing agent, the agent’s pay can’t be tied to amounts collected. That isn’t a blanket ban on percentage fees when Medicare pays you directly, so have U.S. healthcare counsel review the payment flow.
A useful test: give each vendor the same three ledger entries, one old-AR recovery, one retroactive Medicaid payment and one payer recoupment, and ask them to calculate the invoice. If net collections still needs a verbal explanation, the definition isn’t finished.
Performance Guarantees That Hold Up Under Scrutiny
Guarantee what the vendor controls: complete claims, rejection research, escalations, denial work, remittance reconciliation and on-time reports, each with a measurement method and a response to a miss.
Days in AR and collections also depend on census, eligibility, documentation and payers, so review them jointly against a baseline, and separate vendor failures from facility holds before penalizing outcomes.
For repeated misses, agree a sequence ending in a real remedy or termination right. Have counsel read each guarantee next to the liability cap and any exclusive-remedy clause, since either can quietly cancel it.
SNF Billing KPIs to Demand From an RCM Partner, With Fixed Formulas
Write each formula, period and source system into the agreement, and require reporting by facility and payer as well as in total.
| KPI | Formula or fixed definition | Cadence |
|---|---|---|
| First-pass acceptance rate | Initial claims accepted by the payer divided by initial claims submitted; clearinghouse rejections separate | Monthly |
| Initial denial rate | Initial claims denied divided by initial claims adjudicated, in count and dollars, by reason | Monthly |
| Days in AR | Ending AR divided by average daily net revenue for an agreed period, stating whether legacy AR is included | Monthly |
| AR over 90 days | AR older than 90 days on the agreed aging basis, divided by total AR on the same basis | Monthly |
| Cash posting lag | Average business days from remittance availability to posting; unapplied cash separate | Monthly |
| Appeal win rate | Appeals decided favorably divided by appeals decided, by payer and level, with recovered dollars | Quarterly |
| Medicaid pending aging | Pending residents and dollars by days since application, with owner and next action | Monthly |
| Unbilled and held claims | Count and dollars not submitted, by payer, hold reason, owner and next review date | Weekly |
Don’t let first-pass acceptance be called a clean claim rate without saying what clean means, and read appeal win rate alongside open appeals. Set targets from your trailing results, lock the formulas, and give your controller the claim-level records behind each number. Our in-house vs. outsourced SNF billing cost analysis covers the separate build-or-buy decision.
Want a Second Read of Your Draft Agreement?
Send LTCPro’s long-term care billing team the agreement you’ve been given. We’ll mark up the scope, service levels, fee definitions and exit terms from an operator’s point of view. It’s an operational review, not legal advice.
Send our long-term care billing team the agreement you’ve been given. We’ll mark up the scope, service levels, fee definitions, and exit terms from an operator’s point of view.
Compliance Allocation: BAA Terms, Screening, Audits and Clearinghouse Risk
Since you remain responsible for claims submitted for your facility, negotiate the access you need to oversee them.
Business associate agreement
Check it against (HHS’s sample BAA provisions) and (45 CFR 164.504(e)), and align its data-return terms with the commercial schedule.
Exclusion screening
Agree who screens, how often and what proof you get. (Read the OIG’s bulletin on exclusion) which recommends monthly checks, including billing contractors.
Audit cooperation
Name who receives a documentation request, who pulls each set of records and who approves the response.
Clearinghouse continuity
The February 2024 Change Healthcare cyberattack disrupted billing across the country, and (HHS’s Office for Civil Rights opened an investigation) the following month. Ask which intermediaries your vendor relies on and how fast it reports an outage.
Subcontractors and offshore access
Require disclosure of subcontractors and every location where data is accessed. HIPAA doesn’t ban offshore work, but you should know.
Billing Vendor Termination Clause: Exit, Runout and Data Return
Negotiate the exit while you have leverage: termination for convenience and cause, notice, cure and any exit fee. Define which accounts the runout covers and its price and end point. Require claim histories, AR notes, remittances, Medicaid pending records and authorization logs by fixed dates, even during a fee dispute, and confirm portal and ERA access before service ends.
Then stress-test the clause. A Medicare claim comes back after cutover, a Medicare Advantage appeal is due, Medicaid approves a pending resident, and a payment arrives without its remittance. If you can’t name the owner, access and fee for each, the clause needs more work.
Questions CFOs and Compliance Leads Ask About Billing Company Contract Terms
Is a percentage-of-collections fee legal for SNF billing?
It isn’t automatically prohibited or safe. Federal rules restrict it when an agent receives Medicare payments, and the OIG has flagged the risk, so have counsel review it.
Who’s liable if the billing company submits an incorrect Medicare claim?
You can’t contract away the provider responsibility CMS describes. Negotiate claim-level audit access, error notification, correction support and real remedies.
How should one agreement cover facilities in multiple U.S. states?
Use a master agreement with a schedule per facility and state, naming each Medicaid program and managed care plan, and require KPIs by payer and building.
Should the BAA survive termination?
Its data-protection duties should last as long as the vendor or a subcontractor holds your data, which the HHS sample language supports.
What if clinical records aren’t ready before an appeal deadline?
The vendor should request them promptly, log the gap and escalate as the deadline nears.
Set Your Baseline Before You Sign
Our long-term care billing team will review your AR aging, denials, unbilled claims and Medicaid pending list at no cost, so every SLA target starts from your real position. You can also see how our revenue cycle management services are scoped for SNFs.
Our long-term care billing team will review your AR aging, denials, unbilled claims, and Medicaid pending list at no cost, so every SLA target starts from your real position.
About LTCPro
LTCPro is a U.S.-based back-office outsourcing and revenue cycle management company built for long-term care. It supports skilled nursing and assisted living facilities in the United States with revenue cycle management, medical billing and accounts receivable, prior authorization, accounts payable, general ledger and bookkeeping, and payroll, along with proprietary long-term care software. LTCPro is headquartered in Somerset, New Jersey, and is part of SiriNiti Techsource Inc.
